Winston Brassington: NBS is one of the largest financial intermediaries in Guyana, with assets exceeding G$35 billion. NBS recently increased its investment in the Berbice Bridge from G$350M made in 2006 to G$1.87 B in 2009, following the acquisition of G$1.52B in bonds previously owned by CLICO.
The soundness of the investment by NBS can be looked at from the following perspectives: first, the Berbice Bridge project has been successfully completed, materially in line with its capital budget; second, the NBS has consistently had a large portion of its assets invested in cash and Government paper earning about 3% per annum—the Berbice Bridge bonds yield 9% and 10% per annum, with interest paid semi-annually; third, based on recent performance of the bridge since the removal of the ferry, the annualized income of the Bridge is surpassing its first year projections indicating that the revenue projections may be conservative.
When the Berbice Bridge was being considered, investments were sought from all of the major financial intermediaries in Guyana. The investment instruments, which are freely transferable, are tax free instruments that offer between 9% and 11% annual returns. Common shares have a higher return.
Most financial institutions have substantial liquidity and were receiving only 3-4% on cash deposits and Government paper. The investment returns from the Berbice Bridge are therefore attractive.
In April 2005, the NBS expressed an interest by writing to the Privatisation Unit/NICIL expressing a willingness to invest up to G$2B in the project at an interest rate of 9%. NICIL, on behalf of the BBCI, was responsible for structuring and arranging the financing for the project. The Berbice Bridge Act which was unanimously passed in Parliament at the end of 2005 provided that the NBS may invest in the Berbice Bridge project, subject to such terms and conditions as the Minister of Finance may set. All political parties in Parliament supported this Bill passed on December 29th 2005.
In 2005, over half of NBS assets were held in liquid form (cash and short term securities), which was consistent with previous years. At the end of 2005, investments held by NBS in Treasury Bills and Cash exceeded G$13B. At the end of 2008, this figure exceeded G$14B. This phenomenon in Guyana, seen in most financial intermediaries for the last 20 years, is as a result double digit annual growth of financial sectors assets, but credit growth not catching up.
In 2006, largely as a result of critics of the Berbice Bridge, the NBS declared at that time, that its investment will only be G$350M. Many of the same critics are now back again, against the investment. Notwithstanding the substantial reduction in 2006 of its earlier expressed interest, the financing for the Berbice Bridge project was secured by mid 2006, with the top 5 commercial banks, most of the major insurance companies, most of the pension funds, the NIS, and a number of major corporate investors participating. This level of participation was broad based and signaled confidence in the project structure and terms.
Now that the project has been successfully built, the acquisition of the NBS of additional Bonds already issued by the Berbice Bridge has much less risk. Except for its initial investment, NBS is not exposed, as was all the investors including CLICO, to the project completion risk. That the bonds were acquired after completion of construction, at face value, indicates a good deal for the NBS. Its total investment in the BBCI now stands at app 5% of its assets.
The soundness of the investment by NBS can be looked at from the following perspectives: first, the Berbice Bridge project has been successfully completed, materially in line with its capital budget; second, the NBS has consistently had a large portion of its assets invested in cash and Government paper earning about 3% per annum—the Berbice Bridge bonds yield 9% and 10% per annum, with interest paid semi-annually; third, based on recent performance of the bridge since the removal of the ferry, the annualized income of the Bridge is surpassing its first year projections indicating that the revenue projections may be conservative.
When the Berbice Bridge was being considered, investments were sought from all of the major financial intermediaries in Guyana. The investment instruments, which are freely transferable, are tax free instruments that offer between 9% and 11% annual returns. Common shares have a higher return.
Most financial institutions have substantial liquidity and were receiving only 3-4% on cash deposits and Government paper. The investment returns from the Berbice Bridge are therefore attractive.
In April 2005, the NBS expressed an interest by writing to the Privatisation Unit/NICIL expressing a willingness to invest up to G$2B in the project at an interest rate of 9%. NICIL, on behalf of the BBCI, was responsible for structuring and arranging the financing for the project. The Berbice Bridge Act which was unanimously passed in Parliament at the end of 2005 provided that the NBS may invest in the Berbice Bridge project, subject to such terms and conditions as the Minister of Finance may set. All political parties in Parliament supported this Bill passed on December 29th 2005.
In 2005, over half of NBS assets were held in liquid form (cash and short term securities), which was consistent with previous years. At the end of 2005, investments held by NBS in Treasury Bills and Cash exceeded G$13B. At the end of 2008, this figure exceeded G$14B. This phenomenon in Guyana, seen in most financial intermediaries for the last 20 years, is as a result double digit annual growth of financial sectors assets, but credit growth not catching up.
In 2006, largely as a result of critics of the Berbice Bridge, the NBS declared at that time, that its investment will only be G$350M. Many of the same critics are now back again, against the investment. Notwithstanding the substantial reduction in 2006 of its earlier expressed interest, the financing for the Berbice Bridge project was secured by mid 2006, with the top 5 commercial banks, most of the major insurance companies, most of the pension funds, the NIS, and a number of major corporate investors participating. This level of participation was broad based and signaled confidence in the project structure and terms.
Now that the project has been successfully built, the acquisition of the NBS of additional Bonds already issued by the Berbice Bridge has much less risk. Except for its initial investment, NBS is not exposed, as was all the investors including CLICO, to the project completion risk. That the bonds were acquired after completion of construction, at face value, indicates a good deal for the NBS. Its total investment in the BBCI now stands at app 5% of its assets.
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